Microsoft updates Windows for phones

Allison Linn, The Associated Press

Published
10:00 pm PDT, Monday, May 8, 2006

REDMOND -- While Microsoft Corp. has been making headlines for its long-delayed new Windows operating system for personal computers, developers have quietly been at work on a new version of another Windows, this one found in everything from sewing machines to sophisticated cell phones.

A beta version of the revamped Windows CE will be introduced to software developers at a conference today in Las Vegas.

The update also will provide the basis for Windows Mobile, which is built for sophisticated cell phones but which even the company concedes can be clunky.

Users can expect to see products based on both systems in 2007, Microsoft says.

Microsoft is trying to conquer the growing market for sophisticated cell phones. It also says it sees more opportunity for Windows CE, a decade-old technology that the company has long pushed for small electronic devices, and says can be used for everything from gas station pumps to television recorders.

Analysts say the market has a lot of potential, although Microsoft has hard work ahead.

"The company's historically about what? Operating systems. And operating systems are used by more and more classes of devices," said Joe Wilcox, an analyst with Jupiter Research.

For now, Microsoft's mobile and embedded devices unit represents a tiny chunk of its overall revenue, just $89 million of its $10.9 billion total sales during the last quarter. The unit has not been consistently profitable, losing $14 million in the most recent fiscal third quarter.

By comparison, the unit that includes Windows for PCs earned $2.48 billion in the quarter. A new version of Windows, Vista, is expected to be available for consumers early next year.

Microsoft has brought to market an array of so-called "smart phones," the broad term for phones that can do things such as check e-mail and keep track of appointments.

In a major coup late last year, Microsoft struck a deal with Palm Inc. to launch a Windows-based version of the Treo smart phone, after years of battling against the traditionally dominant Palm operating system for handheld devices. The deal came after Palm had spun off its software division.

But now Microsoft is facing stiff competition from Research In Motion Inc.'s popular BlackBerry, which has built a loyal following for checking e-mail on the go.

Microsoft also must battle an array of other companies, all seeking to add even more functions to mobile phones.

Microsoft believes it has an edge in that its system is similar to Windows for PCs, and that Windows Mobile has the potential to offer more functions than some of its rivals.

The problem, however, is finding those bells and whistles.

Tim Bajarin, principal analyst with Creative Strategies, said it can take two to four button clicks to get to a feature on the current version of Microsoft's mobile operating system, but only one or two clicks to reach the same function on the Palm operating system. It also can be difficult to find and use non-Microsoft applications on the phones, he said.

Such problems could be fatal in a market where devices are bought because of their convenience, and are advertised to make life easier, not harder.

"To be able to make things much easier to use and access and navigate should be the goal of Windows Mobile," Bajarin said.

As people begin to use phones for more work tasks, Microsoft also is counting on some competitors to drop off. That's because it believes that outside developers won't want to customize their applications to work on a dozen different operating systems and will instead focus on a few major platforms. It's one reason Microsoft is working so hard to appeal to developers.

"I don't think there's going to be a huge number of players just because the industry can't support it," said Suzan DelBene, a corporate vice president in the mobile and embedded devices unit at Microsoft.

"Do we think we're going to be a lead player there? You bet," she added.